HCR: Winners and Losers

As with all battles, the recent fight over Health Care Reform left us with winners and losers. But due to the sheer size, scope and complexity of this legislation, deciphering who won and lost isn’t easy. Certainly, those of us who feel that government is too large, consumes too much of GDP and has overreached the boundaries established by the Constitution feel he nation lost. Despite that, some groups will undoubtedly see a financial and/or services benefit from these new laws. Others in our society have just been given a swift kick in the nether regions. I’ll attempt to break this down as simply as I can. But, this is nearly 4800 pages of legislation – even I can get something wrong here.

The Winners:

Uninsured folks (well, some of them, anyway): The legislation promises to extend health insurance to 32 million Americans who currently go without. Some will receive direct government subsidies to help aid in purchasing, others will be enrolled by their employers (see more on this below) and the rest will be shoved into Medicaid (more on this, too).

Medicare Part D recipients: You now have an additional $250 in prescription coverage.

Drug Manufacturers: They get an increase in patent protection, from 7 to 12 years. That basically freezes out competition from generics, which gives the manufacturer more time to recoup their investment in R&D. Also, with so many more people enrolled in health plans and no change to the fee-for-service payment model, expect doctors to write more prescriptions than ever.

Try as I might, I can’t find anyone else who actually benefits from this…

The Losers

Small Business: Businesses with more than 50 employees will receive a tax credit to help enroll their employees in a health plan. The exact amount of the credit is ambiguous, but it could be as much as 50% of the per-employee cost of the plan. Sounds great, but if you don’t currently offer insurance to your employees and fall in the 50-200 employee range, you’ve just incurred a new expense. And don’t think of enrolling your employees in any government sponsored plans: there are BIG penalties for even trying.

Medium Business: If you have 200 employees or more, congratulations! You’ve just been promoted to being a “Big Business” and as such, you are now required to offer insurance to all of your employees. But you don’t get the tax credit – you just have to enroll them or pay ginormous penalties for failing to do so.

Insurance Providers: This may sound counter-intuitive, but insurance companies stand to lose in this deal. After all, they’re getting 30+ million new enrollees, most of whom (conceivably) are hale and hearty. But “insurance” will become a misnomer; these companies have now become de facto 3rd party payers. The policies they underwrite will no longer be able to exclude people with pre-existing medical conditions, nor will they be able to cap total per-patient expenditures. Ordinarily, a company would respond to these realities by raising premiums – but with the creation of a federal oversight board, insurers will face limits on how much those premiums can be raised. If insurers were operating on normal profit margins, most could probably withstand these non-competitive pressures. But most are working with razor thin margins already; this legislation could easily see a consolidation of the industry into 3 or 4 companies that have enough reserves to withstand he initial losses.

Persons with pre-existing conditions: You’ll need to wait four years before being assured you can receive medical insurance. Until then, you can still be frozen out. Worse yet, you may be forced into Medicaid – which would mean lower quality care than you may be receiving already.

The uninsured: This may seem like a misprint; after all, how can the same group both win and lose? It’s not so difficult. If you’ve chosen not to have health insurance due to cost or just because you don’t see the necessity. you are now royally screwed. Either buy it, or pay a penalty – of up to 2.5% of your gross income. Of course, you may just decide to say to hell with it and pay the penalty – if you make, say, $50,000 per year, the penalty amounts to $1250. Good luck finding coverage for less than that.

The Insured: If you’re part of the 90% or so of the nation that currently has health insurance, get ready to pay more and receive less. As mentioned, insurers will certainly need to raise premiums and co-payments to stay in business. At the same time, the number of medical providers isn’t dramatically increasing. If you thought long waits at the doctor’s office were the norm before, well…imagine even more patients cramming into the waiting room. Even emergency rooms can expect to feel the pinch: in Massachusetts, which unveiled it’s own version of insurance-for-all last year, emergency room visits have actually gone up, not down.

States: Ever wonder why the “Cornhusker Kickback” was demanded by Sen. Ben Nelson (D-Neb)? It’s because of the increased number of people that are going to wind up on Medicaid, which is the medical insurance program paid for by the states. Yes, the federal government throws some money into the pot, but not nearly enough to cover the people already on Medicaid. Take a state with a relatively dense population, high medical costs and high unemployment, and this becomes a recipe for disaster (can anyone say “CALIFORNIA?”). Watch your state capitals closely – most states are going to need to raise taxes or create new revenue streams just to cover the costs.

Doctors & Hospitals: If you were a doctor or hospital, you might think this was a great thing – until you read the fine print. Yes, you’ll get more patients who can pay, but what are they paying? Undoubtedly, one of the key items not spelled out but certain to happen will be reduced payments for services. Why? Medicaid, Medicare and private insurers will need to pay less per procedure in order to stay solvent. The pot of money they have isn’t really getting bigger, but the amount they’ll need to pay out will be. Unless somebody has changed the laws of mathematics, that necessitates a reduction in per-service fees rendered. So, doctors will work harder and get less money. Also, without any effort at tort reform, malpractice liability insurance premiums are likely to increase. Talk about getting squeezed by both ends – no wonder medical school enrollments are down, for the first time in several generations.

The Upper Class: First of all, congratulations! Your rolls have now been swelled to include families making more than $88,000/year. I suppose in some parts of the country, that’s considered wealthy. But in most of our urban centers, $88k doesn’t get you much. Regardless, that is now magic threshold at which government assistance for medical coverage ends. Additionally, you now get hit with an additional .9% increase in Medicare taxes and a 3.8% tax on investments. (And yes, that includes Roth IRA’s).

Banks: What on earth do banks have to do with health care? I answered that, as well as why they now stand lose billions, in a previous post.

One final thought: there is another group that stands to gain from this legislation: trial lawyers. Considering the number of challenges being filed (as of noon today, there have already been 13), there are going to be more than a few making some big $$$.